Under the Stars, Inc. manufactures sleeping bags in two sequential production departments: machining and packaging. Two direct
Question:
Under the Stars, Inc. manufactures sleeping bags in two sequential production departments: machining and packaging. Two direct materials, fabric and insulation, are used in the machining department. The fabric is added at the beginning of the production process and accounts for 40% of the direct material input. The insulation is added when the conversion process is 50% complete. Conversion costs are incurred uniformly throughout production in the machining department.
The machining department began July with 225 sleeping bags in process and started another 540 sleeping bags during the month. At month end, 220 sleeping bags remained in process in the department and were assigned a cost of $10,450 on the department's July production cost report, $3,850 of which was for conversion costs. Management estimates that the units in ending inventory are 70% complete with respect to conversion costs.
Given the above information, which of the following statements is incorrect with regard to the machining department’s July operations?
A. The total costs to account for in machining during July equals $40,425.
B. Physical units in ending inventory each receive $25 of conversion costs at month end.
C. The cost to complete a bag in the machining department during July equals $55.
D. Machining worked on 765 physical units during July.
E. The costs transferred to the packaging department during July equal $29,975.
